Snap has filed their S1. Let’s see where Snap is compared to the previous high profile social media IPOs.

The IPO Numbers

Facebook

Twitter

Snap

IPO Year

2012

2013

2017

Age

8

7

6

Daily Active Users (DAUs)

526 million

100 million

161 million

Revenue

$4 billion

$317 million

$404.5 million

Revenue Per User

$5

~$2.30

$2.70

Rev Growth Rate yoy

88%

106%

589%

Net income

$1 billion

($79.4 million)

($515 million)

Operating income

$1.76 billion

($77.1 million)

($520.4 million)

Money Raised

$18.4 million

$2.09 billion

$3 billion - $4 billion

Company Valuation

$104 billion

$14.2 billion

$20-$25 billion

Founder ownership

Mark - 28.2%

Ev - 12%
Jack - 4.7%

Evan - 22.2%
Bobby - 22.2%

Founder Valuation at IPO

Mark - $19 billion

Jack - $439 million

Evan - $3.5 billion
Bobby - $3.5 billion

Snap is younger, growing quicker but losing more money than its predecessors. At IPO, Snap’s metric health is worse than Facebook’s but arguably better than Twitter’s.

Facebook had 5x the users and 10x the revenue of Snap. While Snap is losing money, Facebook’s Net Income was exactly $1 billion, showing that Facebook was not only healthy but in control of their margins.

At their respective IPOs, Snap and Twitter are less proven. They both show engaged users and revenue growth but have a ways to go before profitability. Twitter had slower growth and less users, revenue and revenue per user than Snap. That being said, Twitter lost less than Snap did the year prior to IPO and Twitter raised less at a lower valuation than Snap is seeking.

Two things that stick out in Snap’s metrics are the losses (lost more money than total revenue) and the revenue per user being nearly half of Facebook’s at IPO. Although Facebook has that sweet targeting information my hunch was Snap’s immersive video ads would command more per user.

To Buy or Not to Buy?

Will the competition, like Instagram Stories kill Snap? Social Media companies are more like TV Networks than a Search Engine. Search has been a winner-takes-all market. In the early days of TV Networks we had ABC, CBS and NBC. People were dubious when Fox entered, with their more raunchy entertainment but it turns out there was a large market for Fox to serve for decades to come. In retrospect, that was the beginning and there was room for hundreds of cable networks as well. Perhaps we’ll see something similar with these type of companies.

But what are these type of companies? Snap says it’s a camera company. In their essence, all three are ways people share, kill time and keep up to date (mainly) on their phones.

The macro trends are in Snap’s favor. Snap’s engagement and user numbers are shocking considering how long stories take to load with typical bandwidth. As bandwidth improves so does the user experience, likely making the ~25 minutes of daily use increase. Bandwidth issues may be to blame for Snap’s current low international growth and that will change with time.

If you’re going to invest in the Snap IPO you’re not doing so because of the metrics. You buy the Snap IPO because you believe in Evan. He’s shown his ability to delay gratification for the long term, turning down overtures that would make him richer than he could ever imagine. Evan has an eye for acquisitions – Looksery (selfie lenses) and Bitstrips, both of which are a big hit. Most importantly to me, as a “Product Guy”, Evan has shown excellent product vision, evolving an ephemeral messaging product into a social network with a photo editor, video editor, stories (with a business model to boot) and is now evolving into a camera company. What’s next?